Economics, public policy, monetary policy, financial regulation, with a New Zealand perspective

Fortune for the favoured

The coverage in recent days of the first (branded) KiwiBuild houses – one purchased by a young well-travelled couple, no children, she just graduating as a doctor, he something in marketing – brought to mind the books I’d had sitting on a pile for ages intended for a post about the first Labour government’s state house building programme (we used to be told that the KiwiBuild vision was modelled on the earlier programme).

As for the KiwiBuild houses themselves, even the purchasers are unashamed in talking up their good fortune (at the expense of the taxpayer).

The owners of one of the new homes have compared their purchase to winning Lotto.

Couple Derryn Jayne and Fletcher Ross paid $649,000 for their four bedroom home, which they said is great value for money, compared to prices elsewhere in Auckland.

They had given up hope of finding a house on the open market after a year-long search.

Which, frankly, is a bit odd. Of course house prices in Auckland – and much of the rest of the country – are obscene, but even in Auckland you can pick up a first house for well under $649000. I googled houses for sale in Clendon Park for example. It mightn’t be a suburb entirely to everyone’s taste but my in-laws lived there until a decade or so ago. And it is a first house we are talking about, where it isn’t obvious why the taxpayer should be assisting a lucky young couple into a brand-new four bedroom house.

Defenders of the government are quoted in the media. There is an article in this morning’s Dominion-Post (which I can’t find online) in which, for example, Shamubeel Eaqub notes that

…the eligibility criteria were broad. “People also may not know how challenging it is to be a doctor without a private practice and with large debts. I have heard stories of young doctors leaving places like Queenstown because they couldn’t see a way of ever owning a home there.”

Another person quoted in the article observes “even doctors have to start somewhere”.

No doubt. And no doubt it is quite tough for many people starting out, even professionally-qualified couples. But lets just think for a moment about people rather further down the income ladder, typically without the sort of future income advancement opportunities that (many) doctors have. Teachers and nurses for example, or motor mechanics, or retail managers, hairdressers, and so on. If we “need” special lotteries to help favoured young professional couples into homes, how are people further down the income scale ever supposed to manage? Ah, but, says the minister Phil Twyford, that is to miss the point: apparently KiwiBuild isn’t supposed to help low-income families, even though if there was ever a case for direct state intervention in the market it would surely be for those people rather further down the income scale; the sorts of people who not many decades ago could reasonably have expected to buy a basic first house.

An Auckland University economist (Ryan Greenaway-McGreevy) is also quoted in the article. He argues, sensibly enough, that “it shouldn’t be a surprise that a new doctor could qualify. ‘Perhaps it speaks to how unffordable housing has become.'”

Which is, surely, the point. Most people further down the income scale, and especially in Auckland, simply can’t afford to purchase a house at all, at least not without ruinously overburdening themselves. The economist goes on to suggest that KiwiBuild will lower prices for everyone. Even if that were true, it still wouldn’t justify a lottery in which the favoured few pick up a house below market price at the expense of the taxpayer. But, of course, there is little sign that it will be true – many of the early KiwiBuild projects are just rebadging construction that was already going to happen, and over time there is no clear reason as to why we should not expect any specific KiwiBuild construction not to displace private sector activity that would otherwise have taken place.

And surely the evidence against that optimistic hypothesis is in the market prices. If people really believed that whatever the government was doing – KiwiBuild or whatever – was going to lower house and urban land prices over time, then those prices would be dropping already, perhaps quite steeply. Sure, Auckland prices seem to have gone sideways over the last 18 months or so – after a huge surge over the previous few years – but those in many other urban areas are still rising (in both real and nominal terms). Over the last five years, the REINZ numbers now indicate that Auckland and non-Auckland house prices have risen at around the same rate (on average 8 to 9 per cent per annum). CPI inflation is, by contrast, averaging under 2 per cent. When nothing has been done to fix the land market, and most KiwiBuild construction is likely to simply displace private sector construction, none of that should be very surprising. KiwiBuild is producing photo-ops, and Lotto-like wins for the favoured (and lucky) middle class few, but it is no fix – not even any material part of a fix – to the dysfunctional housing market successive governments have delivered us.

And what of the first Labour government’s state-housing programme? Actually, it didn’t do a lot for people at the very bottom either. In the mid 1930s there was much talk of “urban slums”. Ben Schrader’s history of state housing in New Zealand has a nice quote from a newspaper editorial written just a couple of weeks after the 1935 election, contrasting the newly built National War Memorial Carillion tower with the surrounding neighbourhood (in Wellington’s Mt Cook)

“The Tower was built right in the middle of Wellington’s slum area, and a stone’s throw away from it, men, women, and children are making a different kind of sacrifice. They live in squalor and dirt, in little shacks lacking even the ordinary comforts of existence.”

But the state house programme wasn’t for these people. They couldn’t afford the rents. In fact, as Schrader records, one contemporary critic calculated that a worker would have to earn 20 per cent above “the weekly living wage (the amount the Arbitration Court determined was necessary to support a familiy in “reasonable comfort’) to be able to afford the rent on a state house. In its defence, Labour argued that people moving into state houses would free up other houses for poorer people – and in those immediate post-Depression years without the sort of tight land use controls we have today perhaps there was even something to that story (but I’m not aware of any evidence to confirm that conclusion). But it certainly wasn’t a programme targeted to help those at the bottom (indeed, when later governments offered to sell state house to sitting tenants there was often a material wealth transfer to the fortunate minority). And for the first decade or more Maori was also explicitly excluded. Again from Schrader:

“This thinking [around separatism] was challenged in 1944 after the Department of Native Affairs surveyed Maori housing conditions in the industrial Auckland suburb of Panmure. It found Maori crowding into tents and shacks made from rusting corrugated iron and discarded packing cases. Cooking was mostly done over open fires and sanitary conditions were primitive. Sobered by this and other similar reports, the government agreed in 1948 to build state houses for Maori.”

As for the photo-ops in an earlier age, everyone is familiar with the picture of Prime Minister Savage helping to carry the dining table into the first state house in Miramar, but Schrader records

“The Fife Lane function was so successful that a coterie of cabinet ministers repeated the furniture-carrying stunt at the opening of the first state house in each of the main cities.”

I wonder how more photos of Jacinda Ardern and Phil Twyford appearing with new KiwiBuild owners there will be? And how people further down the income scale – perhaps mostly Labour voters – will be feeling about their own prospects of ever owning a modest house (not even a four bedroom brand new one) in one of our major cities. That only seems likely if the government were to tackle the regulatory constraints on our urban land market, and despite the pre-election talk there is still as little sign of that so far as there was action under the previous government. Very little.

(On a completely different topic, I’d just add my voice to the long list of those seriously troubled by the government’s decision to give residency to an imprisoned Czech convicter of dishonesty, and convicted and imprisoned for drug importing, and not even to be willing to explain why. Personally, I can’t conceive any circumstances under which I would support giving such a privilege to a person with such a – very recent – background, the more so when such a person comes from an EU country – none of them is perfect, but none is Somalia or the People’s Republic of China. There are plenty of decent and honest people who would like to live here, and we only take so many: why favour the Czech drug smuggler over any of them? As with the extraordinary exercise of ministerial discretion under the previous government to grant Peter Thiel citizenship, these sorts of cases point to a need for much more openness and accountability. If you want ministers to exercise personal discretion in your favour, you should expect all the details of your case to be published routinely, so that ministers can be properly held to account. It simply isn’t good enough to have the Prime Minister tell us we should “read between the lines” and then refuse to go further. Why would we be inclined to believe that ministerial discretion is being appropriately exercised in this case – and that a drug smuggler with gang associations should be free to stay among us – when the track record (under both parties) inspires so little confidence?

I noted that there are plenty of decent and honest people who would be keen to live in New Zealand. Stuff’s new article on the utter failure of the Immigration New Zealand arm of MBIE to take seriously the scams suggests that many of those who do get to live here probaby do so at the expense of the honest and decent ones.

[head of immigration advisory agency Carmeto] Malkiat believed most visa applications contained some level of exaggeration and misrepresentation, and significant number involved substantial corruption. There was now a generational pattern of exploited migrants in turn exploiting the next wave to arrive, he said.

“The reality is that if all immigration advisers speak up, 80 to 90 per cent of all applications are wrong, and should not be approved – it is a massive number,” he said.

“Most of the industry exists because of fraud. If there was no fraud, many advisers and lawyers would leave the industry [because they wouldn’t be needed].”

It was clear Immigration NZ was not equipped to deal with the widespread fraud that it was encountering, Malkiat said.

Former immigration minister Tuariki Delamere, now an immigration adviser himself, said he too had sent tip-offs to INZ but seen no action. “I sympathise with that adviser [Malkiat] doing that. Senior [INZ] staff have said to me they are understaffed and there are so many [cases to investigate]. I sympathise with them … but I am happy you are exposing it because the only way you stop [these frauds] is by prosecuting them and publicising it.”

Lawyer Alastair McClymont said he “used to tell INZ about them all the time as well – but nothing ever happened”.

Immigration New Zealand declined to comment on the complaints about its service.

That final line says it all really. It is a disgrace. Whether through these immigration scams or the political donations process, Labour and National in turn preside over the increasing corruption of the New Zealand system. And yet their inaction – and silence – suggests they just don’t care. )

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25 thoughts on “Fortune for the favoured”

These days with house price data available daily and computer generated valuations available on your computer, you can watch the prices of your property portfolio move up or down as they get revalued as each sale in the neighborhood occurs daily. Looking at Homes.co.nz and given that I have a portfolio of 11 properties, it tells me that prices in Auckland are starting to move upwards again. The uncertainty created by Phil Twyford of 10,000 Kiwibuild houses we now know is another Labour Party lie(aspirational as redefined by Taxinda Ardern)

It is unlikely the landowner runs off with the profit. It just gets reinvested in other areas of NZ. We are seeing renewal and gentrification throughout NZ, properties which previously was allowed to get rundown and deserted.

Thinks of Nigel Latta’s The New New Zealand which heaped praise on the education industry and the curly haired expert who smacked his chops saying that if he could he would give each and every migrant a medal: “we are extremely selective”.
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The media is our biggest enemy in so far as the expert evidence they seek. What we need is a register of qualified opinion and glink that opinion with interest groups. People may be surprised to find vested interest economists are less inclined to agree that immigration is a major contributor to housing pressures.

This is a help to sell scheme not a help to buy scheme. It was intended for the couple in the article so in 4 years they can buy a 1.3 million dollar house of a couple that purchased a 450 k home in 2011. That couple then buys a 2 million dollar home and fills it with smeg appliances thus creating economic growth.

Yes, it can happen on an isolated basis, but the enduring issue – high and rising prices – relates to the self-imposed land use restrictions. “a blow-in with loads of money of questionable origin” doesn’t have any enduring effect in those (big and growing) cities in the US where new urban land supply and construction can respond quickly to actual/expected fresh demand.

“One in 10 (existing) home transfers in Auckland’s inner city area in the September 2018 quarter were to people who had neither New Zealand citizenship, nor a resident visa. Stats NZ data covering the three months to the end of September, showed 9.8 per cent of home transfers in Auckland inner city were to non-residents. That was a sharp decline from the previous three months in which 22 per cent of homes were sold to foreigners”

But (a) “inner city Auckland” in that measure is a pretty small part of the city, and (b) 10% is a lot less than 22% and GGS is talking about the market gathering pace again (ie suggesting a heightening of demand from some source).

Looking at my ANZ kiwisaver Fund, my portfolio managers returns for the last 12 months have been wiped clean. It is running negative returns now which means it is now starting to eat into my capital contributions. I am sure that would be scaring investors back into property where your rental returns for 12 months from an investment property do not just disappear in a couple weeks of sharemarket volatility.

The subtext conveys a message to all and sundry – don’t worry about the rules – just overstay – you will not be deported – go underground and don’t re-apply

INZ Investigators joke about having a ‘whip around’ or ‘raffles’ to pay for deporting target after budget blowout, according to Immigration NZ emails. Immigration New Zealand was forced to stop deporting all but the riskiest illegal immigrants after a budget blowout earlier this year. No one was to be deported unless they were named on a list created by Immigration management when the funding shortfall was discovered in January. On the list were 22 inmates due to be released from prison, 48 alleged criminals and 14 individuals whose refugee claims had been rejected. It would cost $564,883 to deport all of them

Make no mistake, a civil war cometh… sell all your property, donate all your wealth to charity, go and rent a swamp house from a foreign slumlord and get a job working for an exploitative neo-colonial migrant employer, and see the light…

Many hardworking, honest Kiwis have been deprived of home ownership and children…. the whirlwind is coming.. it will have no mercy..

Josie Pagani writing in The Press:
“The research by More in Common provides some explanation. It found that in countries like ours we can better understand voters by analysing their membership of ‘tribes’.

If an American thinks creativity is more important for children than good behaviour, they probably also think immigration is a good thing. Their views on these sorts of issues are better predictors of other political views than their race, income, gender or who they voted for last.

Among the tribes are two extremes – Progressive Activists on the left, and Devoted Conservatives on the right.

That isn’t quite the way the authors of the report see it. The report shows two wings Progressive Activist 8% on the left and Devoted Conservative 6% plus Traditional Conservative 19% on the Right. In the middle you have the Exhausted Majority. I guess it would have been embarrassing that a small minority of Progressives made so much noise?https://hiddentribes.us/pdf/hidden_tribes_report.pdf

This should be two articles: state involvement in building houses and a separate article about competance at INZ.

The lesson I learned came from this article about NZ state housing was “” first decade or more Maori was also explicitly excluded “”. OK 70 years ago but now I understand many current Maori complaints. In fact I’m impressed that there are so many Maori who control their umbrage better than I would in their shoes. [However on balance I still think Maori only electorates are a mistake and in the most polite way possible eliminated making it clear we have one country and one set of rules.]

State houses
Legislation never barred Māori from accessing state rental housing. However, the perception of officials that few Māori could afford the rents and that their presence would lower the tone of state-housing areas effectively excluded them. This changed in 1944 with a scheme to create a separate pool of Māori houses to be built by the (state) Housing Division and be managed by the Department of Māori Affairs and the State Advances Corporation (SAC).

To encourage their integration into Pākehā society, Māori families would be pepper-potted or dispersed into streets of Pākehā families. (There were a few exceptions to the policy, such as at Waiwhetu in Lower Hutt, where state housing for local Māori was erected around the marae.) But between 1948 and 1954 only 97 houses were placed into the Māori pool by the Housing Division.

In the late 1950s the pool system was abolished and many needy Freeman’s Bay Māori families were re-housed in mainstream state housing in Ōtara (Auckland). From the 1960s Māori communities also developed in the state housing suburbs of Porirua (Wellington) and Aranui (Christchurch).https://teara.govt.nz/en/maori-housing-te-noho-whare/page-3

This is going too far:
Sacha McMeeking, the head of Canterbury University’s School of Māori and Indigenous Studies, says attaching the monopoly label to Matapopore’s rebuild role is misleading.

As mana whenua, the iwi with authority over the land, Ngāi Tahu has a mandate similar to a local council, she says.
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Tax payers Union
“The council should be seeking to consult as broadly as possible, and that’s doubly true with matters of cultural sensitivity,” he says.

They are in effect misrepresenting Christchurch particularly in it’s library where they get name, imagery and predominant language. They were fewer that 500 in the whole of Canterbury in 1850, 121 years later they were 1.6% and today around 6%. Unless you know the history a casual observer would believe the Ngai tahu academic who claimed that “this place” (CBD) “teemed with Ngai tahu people”. There is no evidence of large numbers although there is evidence of people. Christchurch didn’t exist until the Canterbury Association Settlers arrived in 1850. Wool and grain built Christchurch.

The formula is: Inclusiveness = 2 peoples. First peoples have “mana whenua” and are therefore senior Therefore they get cultural say-so.

It sounds like the monarchy in England – not much anglo-saxon blood but by descent they were here first so (from memory) they still get half the swans and all the sturgeon caught in England and own the land between high and low tide. However local government doesn’t ask their permission about anything significant.

I’m still trying to read between the lines. Has the Czech govt asked what is wrong with their law and order?

Mr Lees-Galloway says this individual will be under close scrutiny when he is released from prison. Can he do it personally by moving him into a neighbouring house? I do know I don’t want him living in North Shore – it is only reluctantly I tolerate our own home grown criminals.

It is clear to this expert that our housing problems started when labour embraced diversity and with it international connectedness. As Helen Clark said “foreigners don’t take it with them”. Neville Bennett was the first one I heard say: “we have an international property market”. I can recall when it was a new phenomena to have real estate agents showing groups of Koreans housing. People used to muse about the short term gains of such things as “if I sell that house to a Taiwanese….!?”. Blaming migrants and globalism was moved outside the Overton window. You couldn’t get a twit in the MSM to admit it and if an expert was needed it was someone from a bank (Tony Alexander) or Shamubeel Eaqub or Paul Spoonley.

“New Zealand’s ongoing influx of immigrants is one of ‘‘the most profound changes demographically in this country’s history’’, says Professor Paul Spoonley, Pro Vice-Chancellor of the College of Humanities and Social Sciences at Massey University. Our largest and fastest-growing city has been the greatest beneficiary of this demographic change; it is now regarded as one of the most diverse centres on the planet. Two-thirds of all future growth in this country will blow through the city of sails, says Spoonley.

Bigger influx in Victorian times and those immigrants lived longer and had many more surviving children than the natives. So much as I grumble about our current excessive immigration it cannot be compared with 19th Century immigration. He should say “3rd most profound” with the arrival of the first Maori as the 1st.

A significant difference with the Europeans who arrived 150 years ago was they had new found resources to exploit: gold, wool, meat so the economy boomed. I expect a Maori historian would not look back on the arrival of Britons witrh as much enthusiasm as Paul Spoonley does our current influx.